Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Westpac has cut its 1 year fixed carded rate to 4.19%, matching most of its rivals. NZCU Baywide has also cut carded rates for terms of 6 months to 2 years, by between -15 to -25 bps.
TERM DEPOSIT RATE CHANGES
FE Investments has raised most rates. NZCU Baywide cut its 6 month TD rate by -5 bps to 3.35%.
HO-HUM HOUSING MARKETS
Quotable Value figures for the three months to September show the average value of homes is declining in Auckland, Christchurch and Queenstown, and rising more slowly in other centres. That is the fourth consecutive drop for Auckland. Barfoot & Thompson data for September also shows prices now haven't changed in more than two years. Listings are up however, suggesting more supply than demand in the Spring selling season now underway.
SINKING
Dairy prices fell at the latest dairy auction, making this the fourth decline in a row at these events.
HONG KONG WATCH
After yesterday's sharp decline of -2.4% on the Hong Kong stock exchange, we should note it opened today a further -1% lower. That is a -1000 point drop in five days (from an index of 28,000 on Wednesday, September 26). The Shanghai markets will be hoping there is a turnaround before they reopen next Monday after the Golden Week holiday. However, in the first few hours, today's market has risen, but not quite into positive territory yet..
PEAK CAR
We appear to have plateaued in the rate new cars are selling in New Zealand. September data shows annual sales at 108,776 which is very similar to the rate at the end of last year. Also stable is the share that SUVs are taking, dominant but holding at the low to mid 60%s. Sales of commercial vehicles also seem to have hit their peak, and one that used imports reached about a year ago.
NON-AUCKLAND GROWTH
ANZ job ads fell in the month of September from August, but are up +3.4% over the quarter. In annual terms, job ads were up +6% and that growth is faster than we saw in June. While this growth has lifted off its mid-year lows, it still points to softer employment growth than has recently been experienced. Auckland job ad growth has stalled, and all the gains are coming from other regions (except Christchurch). Wellington is starring in this data.
HIGH LEVERAGE
August data from the RBNZ shows that 49% of bank deposits ("non-market funding") are in term deposits of less than one year to maturity which is the highest level in five years. Another 45% are in at-call deposits. That means only less than 6% matures in one year or longer. Banks also have market funding (wholesale) and all up have a funding base of $431 bln supplied by depositors and the wholesale markets. That compares to the $40 bln the shareholders have at risk.
RETRENCHING
After reaching a peak in May, commodity prices have retreated since and were down again in the ANZ monitoring in September, in fact back to levels we started 2018 at so all the early gains have now been lost. Log prices are started to dip, and on top of falls for horticulture and aluminium, along with minor dips for meat and dairy, the overall track is down. Even the lower NZD isn't enough to stem the slip in local currency.
DECLINING DEMAND?
There was a noticeable lack of enthusiasm for today's LGFA bond tender that offered $210 mln in four maturities. But the overall coverage ratio was down to 1.8x from 2.3x last time and close to 3x the time before. Today the 2033 only got bid for the $50 mln offered. Yields achieved were similar to the previous tender.
PETROL PRICES RISING
And they are rising to record highs, but not driven by crude oil prices or the exchange rate. It is a story all about taxes. And it's regressive.
INTO REVERSE
In Australia, the number of home building permits fell -8.3% in August from July, led by a dramatic weakening in apartment approvals which were down more than -20%. Year-on-year to August things are worse because approvals of houses also declined.
SWAP RATES FALL, FLATTEN
Swap rates are in a bear flattening today. The two year is down -1 bps, the five year is down -2 bps, and the ten year is down -3 bps. The UST 10yr is lower and now just under 3.06%, with the UST 2-10 curve under +25 bps. The Aussie Govt 10yr is at 2.64% (down -5 bps), the China Govt 10yr is at 3.66% (unchanged given it is a holiday week there), while the NZ Govt 10 yr is at 2.62%, and down -3 bps. The 90 day bank bill rate is unchanged at 1.90%.
BITCOIN LITTLE CHANGED
The bitcoin price is marginally lower since this morning at US$6,515.
NZD SLIPS
The NZD is lower today at 65.9 USc. On the cross rates we are a little firmer at 91.7 AUc, and 56.8 euro cents. That puts the TWI-5 down to 70.
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26 Comments
Retired-Poppy,
A lot of that would be in transaction accounts.
For example
1) for businesses to make payments for goods, services, salaries, wages, other costs of operations etc.
2) for individual accounts to make payments for household expenses and spending.
This is probably a better indicator of a potential liquidity mismatch by banks - https://www.rbnz.govt.nz/statistics/l1
There is a 22.6bn shortfall in one week funding by the banks.
CN agreed however, when banks typically borrow so heavily short and lend long this must surely raise the chances of our banks quickly entering a liquidity crisis post an undesirable event like say an oil shock/interest rate shock - right? We are heavily dependent on crude, its already showing up in our trade imbalance being the highest in nine years.
Retired Poppy
Capital market funding is the highest risk source of funding - especially refinancing when market conditions are stressed, and can definitely cause liquidity issues for a bank. This caused the liquidity issues with Northern Rock in the UK which was heavily reliant upon wholesale funding for its business - the lack of funding then caused a deposit run on the bank.
The banks in NZ cumulatively have 110bn of debt securities issued, however no details on the maturity schedule of these securities.
There are also a further 26bn in borrowings, and we don't know the maturity schedule of these loans.
That is not correct. The same source I used for customer funding is available for wholesale funding. As at August 2018 it totals $116 bln. $46 bln is domestic-based funding and 30% of that has time-to-maturity of 3 to 10 years. The $70 bln is offshore wholesale funding, with 58% with time-to-maturity fo 3 to 10 years.
Wholesale funders are quite prepared to lend long to NZ banks. It is only the locals who are very short-term focused.
Retired Poppy,
Even if funding is not an issue, the cost of funding from overseas investors might rise. Take a look how events unfolded in 2008 with the Australian banks.
https://www.afr.com/business/banking-and-finance/financial-services/how…
Perhaps there is a second reason petrol prices are rising.
The headline is a little sensationalist, article isn't
EXPLOSIVE: the real reasons why petrol prices have gone through the roof
https://hat4uk.wordpress.com/2018/10/02/explosive-the-real-reasons-why-…
The price of oil is a construct of Wall street and the oil companies, does anyone think otherwise?
The price of oil went from $30 to $140 on a tiny change in production.
"The ICE Futures Europe symbol for Brent crude futures is B.[6] It was originally traded on the open outcry International Petroleum Exchange in London, but since 2005 has been traded on the electronic Intercontinental Exchange, known as ICE. One contract equals 1,000 barrels (159 m3). Contracts are quoted in U.S. dollars. Each tick lost or gained equals $10."
Beat me to it Rick well done.
realestate.co.nz total available/unsold stock in New Zealand is now 34,103, up from 33,728 on Friday
For Auckland unsold stock is now 12,878 up from 12,681, on Friday.
I said middle of November for 14,000 Auckland Listings and 15,000 by Christmas. I may need to revise those dates forward given the low sales rates.
The declines have been even more steep in more expensive categories with properties in the top 25% of valuations falling by 8.4% in Sydney, and 6.7% in Melbourne, over the past 12 months.
However, more affordable homes in these cities, and in other smaller capital cities and regional areas, had largely avoided the downturn seen in more expensive price segments.
Up until recently, that is.
Well...that's interesting.
What.. leafy inner city suburbs going down in value? https://www.youtube.com/watch?v=hW9tq9ImRTg
The percentages of term deposits on various terms reported doesn't seem right to me.
I'm sure more than 6% are for terms of one year or more. I make it 16 to 20% or am I confused? This means the other percentages are incorrect.
It also looks to be fairly normal historically.
https://www.rbnz.govt.nz/statistics/l3
which does not compute with article
Reason for short termism: 1 year term PIE=3.45$, 5 year 3.8%, not much reward for locking up your hard earned for long enough to experience an OBR event, or a rise in interest rates.
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